Suez-GDF merger faces EU scrutiny

De Villepin has favoured the merger despite mounting opposition

The European Commission has announced that it will review the planned merger between Suez and France's state-owned Gaz de France .

Monday was the deadline by which the commission had to give the deal the go-ahead or launch an investigation.

If the firms merge they would create the world's fourth biggest energy firm.

The merger has been controversial ever since it was first mooted, days after Enel showed an interest in buying Suez.

Back in February, the announcement that the French government supported a merger between Suez and GDF was seen as a way to thwart Italian firm Enel's hostile acquisition of Suez.

The European Commission intervened after complaints from both Enel and the Italian government, but France said it had done no wrong.

The merged firms would have a market capitalisation of about 70bn euros (£47bn).

Ownership law

One of the key concerns regulators are likely to raise is the potential dominance the merged firm would have in Belgium.

The new firm would own Belgium's main electricity supplier Electrabel as well as part-own the second biggest firm SPE. It would also be the dominant firm in Belgium's gas market.

The EU investigation is expected to take at least four months.

Even if the EU gives the merger the green light, France would still need to reform ownership rules.

The government owns over 70% of GDF but a new law would be needed to permit the government's stake to be reduced to enable its merger with Suez.

Dominique de Villepin, France's Prime Minister, has been in favour of the merger despite facing strong political opposition both inside and outside his ruling party.

President Jacques Chirac recently said that the government would soon decide when to submit a bill regarding the privatization of GDF to parliament.